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To: marc ultra who wrote (11606)	2/2/2000 5:35:00 AM
From: Justa Werkenstiff	Read Replies (2) \| Respond to of 15132

Australia raises rates, but fumbles the news By Victoria Thieberger SYDNEY, Feb 2 (Reuters) - Australia's central bank on Wednesday announced a rate hike which surprised most analysts with its severity and annoyed many who missed out when the bank issued the announcement ahead of schedule. The Reserve Bank of Australia admitted to a rare blunder, saying it accidentally sent out an e-mail announcing a half-percentage point hike in the cash rate to 5.5 percent to 64 recipients, six minutes ahead of the official release on the bank's page on newswire services. That triggered a half-cent rally in the Australian dollar and a sell-off in the bill futures market as a handful of banks started trading frantically on the advance knowledge. The gaffe threatened to overshadow what was intended as a strong signal from the Reserve Bank that it was acting to prevent a robust economy from overheating. It also damaged the credibility of a central bank that has not put a foot wrong in recent years, particularly with its deft steering of policy through the Asian crisis. Most analysts had expected the Reserve Bank to continue its recent gradualist approach in adjusting rates with modest quarter-percentage point moves. The aggressive tightening pushed back expectations for the next rate rise. "RBA officials can now afford to sit back for a few months and wait to see whether this second, larger rate increase will take consumer and business sentiment down a notch, and spending with it," said HSBC senior economist Grant Fitzner. The bank's first rate rise in the current cycle last November barely made a dent in rampant consumer spending, sparking fears of economic overheating and rising inflationary pressures as the nine-year economic expansion rolls on unabated. POLICY BACK TO NEUTRAL The move was pre-emptive in more ways than one, coming less than 24 hours before the Federal Reserve is expected to announce its own 25 basis point rate rise. The RBA is always keen to assert its independence of U.S. monetary policy. Reserve Bank Governor Ian Macfarlane cited strong international growth and rising inflation pressures for the tightening. The increase took policy back to neutral, where it neither stimulates nor dampens economic activity. "This tightening... can be viewed as pre-emptive in that it occurred before overheating has emerged, and its aim is to prevent that eventuality from occurring," Macfarlane said. The RBA statement gave specific attention to bloated household spending, the boom in house prices, and easy credit conditions, ANZ Treasury economist David De Garis said. The aggressive move delivered another blow to a government already on the back foot over its plans to introduce a new goods and services tax (GST) in July. The government tried to put a brave face on the bank's move. Both Prime Minister John Howard and Treasurer Peter Costello gave a selective reading of the rationale, blaming international factors. The bank has warned it will raise rates further if the 10 percent GST triggers higher wage claims or fatter margins, which would boost ongoing inflation. Despite four percent economic growth, inflation is still running below the central bank's 2-3 percent target band. It expects the consumer price index to be in the top half of the band by mid-year. Analysts expect the current tightening cycle to peak about 6.0 percent later this year. DID RBA OVERREACT? While some analysts saw the 50-point rate rise as bold and decisive, others questioned whether it was justified. "In my own judgment this is overreaction on their part," said Macquarie Bank chief economist Bill Shields, saying there was little sign of economic strength leading to broad-based inflationary pressures. "The statement accompanying the move more or less seems to say that their inflation target is irrelevant," he said. But by far the greatest disquiet in the markets was over the manner of the release, and the cost to the Reserve Bank's hard-earned reputation. "The bank will have to be very conscious now over the next few months to regain that position on a pedestal," said Deutsche Bank senior economist Tony Meer. The unexpected e-mail delivered a handful of market players a massive trading advantage. "Yes (it affected trading) and it was disgraceful," one senior foreign exchange trader said. "It did start around 9:27 a.m. -- the Aussie started to jump." The Australian dollar rallied three-quarters of a cent by late afternoon, to trade at US$0.6393/98, back from its US$0.6413 high before midday. The nation's largest home lender, the Commonwealth Bank of Australia, said it had passed on the full 50 basis point rise to its home loan borrowers. Other banks were reviewing their rates.

To: marc ultra who wrote (11606)	2/2/2000 7:55:00 AM
From: MrGreenJeans	Read Replies (2) \| Respond to of 15132

Marc It would be out of character for Greenspan, the gradualist, to move more than a 1/4 of a point. A 1/2 point is not in the cards. Last time he raised rates more than a 1/4 point was five years ago. Further, he would have hinted at a greater increase over the last month. Greenspan understands markets don't like surprises especially from the Federal Reserve. It is not going to happen.